Kenya Government Postpones M-Akiba Bond Launch Again over High Cost of Trading

At the beginning of the year, we highlighted key projects the government needs to undertake in a bid to spur the ICT sector in 2016. Among the projects we highlighted included the M-Akiba bond. M-Akiba is a project formulated by the government through Treasury Mobile Direct Programme aimed at allowing investors to invest in government securities through mobile devices.

Through M-Akiba investors would purchase government securities for Kshs. 3,000 compared to the current Kshs. 50,000 threshold through their phones. Investors could invest as much as Sh140,000 for the income tax-free bond. To invest potential investors needed to have a valid ID, dial *889# and follow the prompts and then purchase their bonds.

The project has however delayed several times owing to volatility in the interest markets with launch dates previously set for March, June and even July all rescheduled to the disappointment of investors. In September, the government gave an indication that it was ready to launch the offerings with the Treasury Cabinet Secretary stating that the platform on which the solution was to be provided was ready. The platform was to be managed by the Nairobi Securities Exchange, the Central Depository and Settlement Corporation, the Central Bank of Kenya and telcos and would include a primary infrastructure for the dealership and a secondary infrastructure for trading.

According to The East African, Treasury has again decided to postpone the launch of the M-Akiba bond citing the cost of trading the debt instrument would likely be too high for investors, and wipe out expected investor returns. At the same time, the government was exploring the idea of offsetting part of the costs of trading in bonds through mobile phones as part of efforts to empower small investors and promote a savings culture. If combined mobile money charges take up say 2-3% (excluding trading charges) – while such may be economical for payments, it would account for almost 20% of the expected return earned by a potential investor under a fixed income instrument.

The news is certainly a disappointment for many investors who have been looking forward to the launch of the board and have a chance to play in the financial markets.